Could negative cash flow be deducted?

[Nadiya Lonkevych]

Hi everyone,

I am about to become an investor renting out the condo I currently live in (Columbia/Ellicott City, MD area) and purchasing another house for my family. The condo was purchased in 2006 at it's highest ever price of $160K. Two weeks ago an appraiser came back with a bad news: it's only worth $80K and is underwater (despite all the renovations and updates).  So, refinancing is out of question for at least three-four years until we lower the balance to it's market value.

The plan is to still try to rent it. It could easily bring $1100/mo. Our PITI + condo fee is $1509. That creates a negative cash flow ($409/mo).

After all tax deductions (i.g. depreciation, interest, insurance, condo fees, local taxes etc.) the taxable income is $2,269. This number looks great except after accounting for negative cash flow of $4,908 the adjusted amount is now a loss $2639. 

So, here's my question: can I deduct this amount as business loss?